Lean on Key Lease Documents to Stop Owner from Disturbing Tenant Mix

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October 19, 2018

Tenant mix is a key component of a shopping center or mall tenant’s strategy for financial success. This mix, also known as synergy, boosts foot traffic, increases the likelihood that customers will stay longer, and can make the property into a “destination” center. The types of tenants neighboring an office building tenant are also important. That’s because an office tenant, such as a law firm or corporate headquarters, leasing space in a Class A office building wants other tenants to be equally prestigious.

But if the local economy, demographics, or a public demand for certain types of tenants change, an owner may decide it has to expand its tenant base and lease space to a tenant you think is inconsistent with the building’s or center’s tenant mix. When a shopping center or office building owner is in negotiations with or has leased to an off-brand tenant, it’s not a done deal for you.

If you learn that your building’s or center’s owner is considering leasing, or has already leased, space to a tenant you object to, these are the certain key documents that may help you keep such a tenant out of your building or center:

Lease. Your lease is important because it may have language listing the types of tenants or uses permitted in the building or center. It may also bar certain types of tenants. Lists of barred tenants are common in most retail leases and appear in some high-end office leases as well.

Reciprocal easement agreement. If you’re in a center, the owner may have signed an REA with the owner of an adjoining center or the tenant of a freestanding building at your center. An REA—also sometimes called an operation and easement agreement or a declaration of covenants, conditions, and restrictions—is important because it typically places certain restrictions on the center, including restrictions on the types of tenants or uses that are permitted there.

For two additional key documents that can help you fight an owner's attempt to change the nature of tenants where you lease space, and a Model Letter to send to an owner under this circumstance, see Fight Owner’s Attempt to Change Nature of Center, available to subscribers here.